MarketInsight April 27, 2015

Marlene BoerschMarket Insight

Major grains & oilseeds markets –

The futures markets were volatile last week as computer traders threw some big orders at the closes to create volatility as we approached some resistance points. It might be that we are seeing the start of large computer generated trades in commodities similar to what has been seen in the stock and financial markets, as more cases of inappropriate trading become known. Grain futures are becoming a dangerous hedging tool, only viable for those with deep pockets.

There was some Middle East cash business done. The EU and FSU supplied the grain because these origins are closest to the final destinations and have a freight advantage relative to North America.

Weather was not a problem with most areas reporting favourable conditions.

StatsCan issued their estimate of Canadian plantings for 2015 – which most of the trade appears to disagree with.

 

Soybeans – Ratios tell us that soybeans are overpriced to corn in the old and new crop position. We see more downside in soybean futures, especially as we hear the Brazilian trucker situation should be resolved by the end of the week. Soybeans need to lose about 30 cents to corn.

Canola StatsCan estimated the new crop acres to be planted at 19.416 myn acres, which was close to Mercantile’s estimate but below what most of what the trade estimated. It does not mean much as few traders pay much attention to StatsCan or AAFC’s numbers these days.

Producers delivered 300,000 tonnes in week 37, exports were 146,000 tonnes, domestic consumption was 184,000 tonnes, and the visible supply was a very comfortable 1.45 myn tonnes. We moved 150,000 tonnes to the west coast which supports a good export program. We did not hear of any new business.

Wheat – US old crop export sales were above expectations at 398,000 tonnes but the season total 870 myn bushels remains 24% down on last year; in line with the USDA, (inspections are down 27%). Note that US new crop commitments are down some 40% on last year. Iraq delayed its decision on last week’s tender to Apr 27; it was reported that Syria bought 150,000 tonnes of wheat at $232.00 per mt C&F for May-June shipment. It will require either some significant weather concerns or prolonged US dollar weakness to improve the global cash market outlook during the coming intermediate period, in our view.

Durum – The theme for new crop durum will be one of declining price over the coming intermediate period in our view. In Canada, we expect substantive durum area gains this coming season. 2015 EU area is set to increase, the desert durum crop is due in the late spring – as is EU and African durum as well, and forward US area will likely grow as well.

Barley – China’s March barley imports were 850,000 tonnes (535,000 tonnes of Aussie, 175,000 tonnes France, 115,000 tonnes from Canada) taking the Jan-March period to 2.66 myn tonnes (1.8 myn tonnes Australian, 430,000 tonnes France, 315,000 tonnes Canada, 65,000 tonnes Ukraine, 20,000 tonnes Denmark). Annualized that is a stunning 10.5 myn tonnes import number which is a record for China and the first time China has imported barley for feed. Canada’s participation in the Chinese trade has negligible.

Oats – StatsCan put intended Canadian area seeded to oats at 3.645 myn ac, 545k ac above the mean pre-report trade analyst estimate of 3.1 myn ac (range 2.8/3.3) and comes in 345k ac above the highest guess, and is was 30.3% above the 2014 actual of 2.798 myn. That CBOT oats fell to new lows following this whopping estimate is hardly a surprise. US seeding progress is brisk thus far, while US stocks are 69% above 2014 and 10% above the three-year average.

 

Peas As seeding is slowly starting in the southwest of Saskatchewan and the Red River Valley in Manitoba, little attention is given to a survey done in March. The trade has quickly dismissed the numbers as they were all together at the convention. Internationally there is increased interest in ramping up production (US) in reaction to the positive market signals. Politics are counterproductive in Russia and Ukraine, while France is adding interest in legumes with a “protein subsidy” under their Common Agriculture Policy.

Lentils – Lentil traders quickly dismissed the relatively small increase in the seeding intention report of Statistics Canada. Citing crop return comparison, good movement and price increase since the survey was taken; everyone is looking at more substantial increase in acreage.

 

Transportation – Canadian exports remain behind the AAFC projections. It would require each railroad to load 600,000 tonnes per week until week 52 to reach the AAFC estimates.